Bachelorarbeit. Networks and the Internationalization of Management Consulting Firms. A critical View on traditional Theory.

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1 Bachelorarbeit Nils Laacks Networks and the Internationalization of Management Consulting Firms A critical View on traditional Theory

2 Nils Laacks Networks and the Internationalization of Management Consulting Firms A critical View on traditional Theory ISBN: Druck Diplomica Verlag GmbH, Hamburg, 2010 Zugl. Fachhochschule für Wirtschaft Berlin, Berlin, Deutschland, Bachelorarbeit, 2007 Dieses Werk ist urheberrechtlich geschützt. Die dadurch begründeten Rechte, insbesondere die der Übersetzung, des Nachdrucks, des Vortrags, der Entnahme von Abbildungen und Tabellen, der Funksendung, der Mikroverfilmung oder der Vervielfältigung auf anderen Wegen und der Speicherung in Datenverarbeitungsanlagen, bleiben, auch bei nur auszugsweiser Verwertung, vorbehalten. Eine Vervielfältigung dieses Werkes oder von Teilen dieses Werkes ist auch im Einzelfall nur in den Grenzen der gesetzlichen Bestimmungen des Urheberrechtsgesetzes der Bundesrepublik Deutschland in der jeweils geltenden Fassung zulässig. Sie ist grundsätzlich vergütungspflichtig. Zuwiderhandlungen unterliegen den Strafbestimmungen des Urheberrechtes. Die Wiedergabe von Gebrauchsnamen, Handelsnamen, Warenbezeichnungen usw. in diesem Werk berechtigt auch ohne besondere Kennzeichnung nicht zu der Annahme, dass solche Namen im Sinne der Warenzeichen- und Markenschutz-Gesetzgebung als frei zu betrachten wären und daher von jedermann benutzt werden dürften. Die Informationen in diesem Werk wurden mit Sorgfalt erarbeitet. Dennoch können Fehler nicht vollständig ausgeschlossen werden, und die Diplomarbeiten Agentur, die Autoren oder Übersetzer übernehmen keine juristische Verantwortung oder irgendeine Haftung für evtl. verbliebene fehlerhafte Angaben und deren Folgen. Diplomica Verlag GmbH Hamburg 2010 Printed in Germany

3 Outline of Contents Figures and tables... 4 Abbreviations Introduction Definitions Services Management Consulting Networks The Management Consulting Market Key Data Knowledge The Role of Trust and Reputation Institutional Problems Transactional Problems Internationalization Theories The Uppsala Model Transaction Cost Theory The Eclectic Paradigm A Network Approach Internationalization of Management Consulting Firms Motives for Internationalization Proactive Motives Reactive Motives Different Forms of International Market Entry Exports Wholly-owned Subsidiary Market Entry through Co-operations Implications References... 41

4 Figures and tables Figures Figure 3.1 Global consulting market growth (%/p.a.)...13 Tables Table 2.1 Typology of services...8 Table 3.1 Five key areas for consulting services...12 Abbreviations BDU FDI FEACO OLI SMEs Bundesverband Deutscher Unternehmensberater (German Association of Management Consultancies) Foreign Direct Investment European Federation of Management Consultancies Associations (Fédération Européenne des Associations de Conseils en Organisation) Ownership, Location and Internalization Small and Medium-sized Enterprises 4

5 1 Introduction The French economist Jean Fourastié had already predicted the expansion of the service sector in his early work in Accordingly, the economies of the developed countries were prognosticated a division into the three major branches agriculture, manufacturing and services with an increasing domination of the latter over time. In fact, the actual growth of the tertiary sector even surpassed Fourastié s expectations. Knowledgeintensive business services constituted the fastest growing sector in Western economies at the end of the twentieth century (Lowendahl, 2000, p. 142). Within this group of knowledge-intensive business services management consulting represents one of the fastest growing business models. Before the first economic slowdown in the consulting industry started in 2000, the global market for advisory services had grown at rates between 10 and 15 percent. In Europe, the turnover of the consulting sector rose about twenty-seven percent annually during the second half of the nineties (Glückler, 2001, p.2). Growth today represents one of the key success factors in the consulting business and firms have to reach certain growth rates in order to stay competitive. There are mainly two different strategies for enterprises to achieve the goal of prosperous growth. Firms can either follow the strategy of diversification or internationalization (Glückler, 1999, p. 30). An increasing number of consulting firms decides to expand business activities into international markets in order to stay competitive and take advantage of new possibilities associated with globalization. Empirical studies have shown that the propensity of firms to internationalize not only accounts for large multinational corporations but also for small and medium-sized firms (Glückler, 2004a, p. 3). Therefore, scientists and economists have put attention to the internationalization efforts of management consulting firms. Nevertheless, scientific literature about the internationalization of these business models is still scarce. Most of the existing theories are based on empirical findings that refer specifically to material goods and are thus often criticized for not adequately reflecting the unique characteristics of services. Numerous internationalization theories have been developed during the last forty years. While common theories focus on aspects such as transaction costs or knowledge about a 5